As India's largest airline is forced to ground more planes, will it derail the IndiGo story?

The airline expects anywhere between 30 to 40 aircraft being grounded in the Jan to Mar 2024 (Q4-FY24) quarter due to this issue, which is in addition to the 45+ aircraft which are already grounded for want of engines.

IndiGo has shared an update on the preliminary assessment of the impact of the powder metal issue on its Pratt & Whitney powered fleet. The airline, the country’s largest by fleet and domestic market share, expects 30 to 40 aircraft being grounded in the January-March 2024 (Q4) quarter because of this issue. This number will add to the 45 airplanes already down for want of engines.

The analysis means that one-fourth of the IndiGo fleet will be grounded in what is traditionally a weak season for airlines. With matter hanging fire, has the IndiGo story run into rough weather? Operationally, it definitely puts in more stress on the airline, while financially, a lot depends on the compensation that the carrier is likely to get, though it has been silent about citing contractual clauses.

Capacity guidance maintained

The airline continues to believe that it can maintain the capacity guidance for FY24 which is 'north of mid-teens'. Additionally, the groundings wont impact the current quarter financials and the capacity guidance of 25 percent surge this quarter over same period last year.

The airline flew 1,49,146 scheduled departures, comprising both domestic and i nternational flights, in Q3 of FY23 and in terms of capacity saw the deployment of 2,869 crore ASKs. A 25 percent increase in capacity would mean that it would deploy 3,587 crore ASKs this quarter.

Mitigation measures in place

The airline inducted two B77Ws from Turkish Airlines on damp lease and deployed them on the India-to-Turkey routes where it runs 14 weekly flights. From a capacity standpoint, just these routes have seen an increase of capacity by 2.3 times.

Systemwide, the airline is inducting 11 damp leased A320s and looking at inducting 12 A320ceos from the secondary market. Airbus does not produce A320ceo any more, with the entire production having shifted to the A320neo family.

IndiGo has extended leases of its aircraft which were due for redelivery but these are A320neos. For a brand-conscious airline like IndiGo, it would be hurting to see the planes mostly white except for the IndiGo logo on the fuselage.

Resurgent competition will strike

Air India, which placed an order for 470 aircraft at the Paris Air Show, is getting its act together, a year and a half after it changed hands from the government to the Tatas. The group which comprises Air India and Air India Express, will take delivery of one new plane every six days on an average until the end of 2024. The immediate term plan is to add 50 aircraft in quick succession for its low-cost arm Air India Express.

Air India has been lucky in a few ways since the takeover by Tatas. The geopolitical situation which changed just a month after the deal has meant that it has limited or next-to-nil competition on non-stops between India and North America. As it gets its act together on the narrow-body side, the Pratt & Whitney issue will put IndiGo’s expansion on a slow burner if not completely stop it. The mitigation plan for IndiGo will be expensive as well, which will take away the huge cost advantage that the airline enjoys.

Air India is not the only airline looking to scale up, SpiceJet has inducted planes on wet-lease to claw back its market share as well, but the impact may be minimal for IndiGo. Likewise, Akasa Air’s expansion will also have a limited impact on IndiGo with Akasa Air’s expansion moderating.

What should you do as a passenger?

The Airbus A320neo family and Boeing’s MAX have been through rough patches since they were announced. The latest groundings for IndiGo could take away growth from the market and would likely be aimed at refilling the lost capacity. Boeing sees a delay in its delivery schedule as it grapples with issues during production and does re-work and re-check before delivery. If this delays the delivery of planes to Air India Express, the country will suffer in terms of capacity being deployed with a potential to see an increase in air fares, moderating growth and possible loss of some flight connections.

As a passenger, if you are scheduled to book or travel, it does not look like a problem right now. However, it is important to update your contact details with the airline and have a sharp eye on the flights which you have booked to see if there are any changes.